Internet Freedom Comes from Markets Not Government

The Unbearable Lightness of Advocates for Title II Net Neutrality Regulations

Progressives are good at use and abuse of language, in particular defining their agenda items in terms of the broad goals rather than actual impact of their proposals. Hence, we see and hear earnest advocates for “net neutrality” argue about how great the internet is and would be if only the wonderful ‘net neutrality’ that it is built on it is guaranteed – by a huge does of heavy-handed FCC regulation. Now the FCC has voted and passed their Title II regulation proposal.

David Karp, the young CEO of Tumbler, argues to “Keep the Internet Free” via Title II regulation. He argues unconvincingly that ‘to keep the internet free’ we have to impose FCC Title II regulations on it; to preserve the status quo, we have to drastically shift how government has treated it; and to worry about hypothetical risks from abuses from ISPs while ignoring risks of abuses from Government bureaucrats. His op-ed is a particularly vapid example of the unbearable lightness of a naive, uninformed advocate for government regulation, made almost Orwellian by Karp’s claim that it’s for ‘freedom’. For the sake of the internet, we need to explain why he is wrong.

There is not much argument over the goodness of net neutrality. Net neutrality as a buzzword has come to encompass specific concepts of treating bits as bits and not dicriminating : ISPs should deliver access that don’t get between the user and the internet as a whole, and should not engage in prioritization, blocking, throttling, etc. based on the content to limit that access to an open and free internet. Conservatives and liberals alike want an internet that is open and gives us access to all the internet has to offer without hidden gotchas and limits. The real argument is whether you trust markets or the Government more to deliver on that promise, and the extent to which we need Government dictating rules of the internet.

David Karp built Tumbler in an internet era of ‘light touch’ regulation, one where the FCC explicitly did not treat the internet as a Title II and did not impose 1930s style regulations on 21st century technology. That light touch regulation environment was deliberate; the FCC widely realized that they didn’t know where the internet would be going, and didn’t want to impose constraint that could stifle innovation. Karp today marvels at the internet that we have had as a result of that ‘light touch': “And that’s the promise of net neutrality.” It is indeed.

So because Karp likes the internet the ways it’s been for 20 years, he wants to muck it up and destroy a market-based internet and turn it into an FCC regulated Title II internet. Huh? If he wants to maintain the status quo, he shouldn’t be advocating such a drastic change to the status quo. He shouldn’t be for going backwards to the bad old days of Bell monopolies and government over-regulation. What’s his reasoning? he argues that somehow ISPs, who deliver the internet to us, are lurking in the shadows ready to destroy the internet they deliver to consumers, and will screw things up:

” Internet providers saw an opportunity to pick winners and losers, rather than let the internet continue to sort those things out for itself.”

Let’s point out how hypocritical it is for one of the internet ‘winners’ to not admit that, for example, Yahoo engaged in picking winners and losers by biasing in favor of Tumbler content versus other blogs. Internet content providers do a lot MORE picking winners and losers. Internet content providers have larger market caps, more market power, and more monopolistic power in their own way. This is like a big linebacker complaining he’s getting bullied by a 95 lb weakling.

But leave that aside, the main argument for Title II regulation is a list of concerns that for the most part are hypothetical. Access is not blocked; bits are not prioritized; bit torrent and Netflix traffic is massive; and ISPs get a fraction of the share of revenue from the internet. And why not? Because consumers and internet content providers alike have pushed back when ISPs have attempted . The markets themselves have imposed limits on what ISPs can do. Ah, but they argue, ISPs are evil monopolies. Never mind the fact that 90% of Americans have at least 2 broadband options. Never mind the fact that where there are monopolies, they are due to local policies limiting fiber buildout. Lift the limits and encourage competition and use anti-trust tools to stop that.

Why does Karp really insist that ‘paid prioritization’ is a bad evil thing? It means internet content providers like Tumbler might have to pay for access to distribution. That might be bad in general, but what about the fact that some content providers hog massive bandwidth (that’s you Netflix). To support that bandwidth, ISPs have to build out more infrastructure; how can they pay for it? That’s right, charge the bandwidth hogs. All of the actual, non-hypothetical cases of ISPs vs content providers – the bit torrent case, netflix vs Comcast, etc. – have all revolved around that basic point: Can you get bandwidth hogs to pay for their use?

So the REAL hidden agenda here, of Tumbler, Netflix, and other internet content providers is this: They want a free ride; deliver content and hog bandwidth without having to pay for the infrastructure costs. They wrap themselves in ‘net neutrality’ over what is really a business versus business argument.

Why should non-netflix user subsidize netflix users? How is that some golden principle of internet justice? As a non-netflix user, I no more want to pay the ‘same’ as a Netflix bandwidth hog than to pay premium cable for basic cable. How would internet content providers paying for bandwidth costs somehow ruin it for everyone? Tumbler pays for cloud servers, they pay for marketing, why should the pipes be free for them? Does Karp really want to argue the the small costs of interconnection would mean the end of Etsy and other sites? In the real world, such things are a negotiation, the same way retail distributors, wholesale providers and consumer haggle over prices.

Can one think of a world where it MIGHT make sense to have paid prioritization? Why, yes of course. A video-over-IP provider providing telemedicine knows that it is a matter of life-and-death to have bandwidth. They would be willing to pay for it, because lives are literally on the line. Under David Karp’s ideal internet, that innovative market-based solution is so eeeevil he wants it outlawed. That makes no sense. It’s an anti-innovation position. In the end, ‘net neutrality’ is a good thing overall, but as a rigid principle of the only way a good internet can work, to the point of outlawing alternatives, it falls flat.

The one true encompassing principle should be: Consumers, ISPs, and internent content providers should have the freedom to make internet access arrangements that work best for them, their suppliers, their customers, and free from abusive or anti-competitive practices. Consumers should not be forced into accepting an ISP that abuses their channel to the consumer with blocking or throttling of internet services the consumer would expect. But beyond that, a world of enforcing a specific view of how the internet should work is precisely the opposite of how the internet came to be.

Karp fears a ‘stagnant internet’. He seems both naive and oblivious to the fact that regulations do not instill freedom, but stifle freedom. Regulations create stagnation. This is why Sen. Ted Cruz (R-TX)Heritage ActionScorecardSen. Ted CruzSenate Republican AverageSee Full Scorecard95% has spoken about the internet ‘moving at the speed of Government’ if the FCC regulates it under Title II. And without a doubt, one unintended consequence of FCC internet regulation will be less innovation. We’ll see less investment, startups and innovation in particular in the pipes, in distribution. The massively growing internet will stagnate, and we’ll also see less innovation in how we might use and apply that massive bandwidth. As FCC moves to a Procrustean bed of “all bits are equal”, they’ll disallow innovations that would otherwise push outside those limits.

Karp is completely oblivious to the reality of what FCC Title II regulations mean and will do:
– Regulations give power to lobbyists and give rise to ‘regulatory capture’ as each corporation will ‘game’ the hundreds of pages of regulations to their pecuniary benefit
– Regulations will chill competition and make it harder, not easier for new entrants, who will face daunting regulatory compliance costs
– Regulations open a Pandora’s box. The FCC can regulate pricing, access, limit the ability of new innovative services to try different business models

Since Title II is an elephant gun solution, broad and with potential for mischief, FCC itself has promised ‘forebearance’ in their application. That alone should be a clue that maybe Title II is the wrong answer; a bureaucrat promising to go easy on regulation is not a promise you can trust. Even advocates like EFF (electronic freedom foundation), who support Title II regulation, have been warning that FCC has opened a pandora’s box in some of their proposals. They are murky and fraught with misunderstanding. Ajit Pai, FCC board member who dissented on this proposal, has pointed out how there hundreds of court cases just to define what one section of Title II means. It will take years and many litigations to work out whether FCC’s claim of Title II authority is solid, and what it all means.

No wonder there are many lawyers in favor of this, it’s a boondoggle for them. It will be great for lobbyists as well, pushing and pulling on the devil in the details for corporate advantage. Consumers will lose, bearing extra costs of litigation in our bills while not getting any benefit from an elephant gun that is shooting at gnats that aren’t real.

If there is any hypothetical dangers worth worrying about it’s these:
– FCC could impose a ‘fairness doctrine’ on the internet (as they once did on radio) and regulate content. Would David Karp want Tumbler blogs reviewed by the FCC for content?
– FCC could impose price regimes and pricing controls as well as controls on terms of service, as title II allows, adding to overall costs on business
– FCC would likely end up putting more taxes and fees on consumers, just as you get on phone bills

These scary hypothetical dangers might happen, might not happen. But unlike the scary claims of the proponents of regulation, these at least have a basis in the history of FCC regulation.

Yes! Internet freedom is threatened. Now. By FCC Title II regulation that will take away freedom and replace it with heavy-handed government oversight. The right fight is to say no to Title II regulation, an elephant gun applied to gnat-sized problems. Then go back to Congress to implement limited regulations specifically to stop particular abuses (those limited items wrt blocking access that the FCC tried to regulate in other ways but got stopped in courts). Then leave the rest to the market, the same free market that produced the wonderful free internet we have today.